Head Of Italy's Second Largest Industrial Conglomerate Arrested

Just when you thought you had heard it all - from Spanish politicians to Italian bankers - along comes the CEO of Italy's Finmeccanica. Giuseppe Orsi has been arrested for his alleged involvement in a bribery to ensure the Italian aerospace company got the order for Indian military helicopters in 2010. The $750 million deal, as reported by the WSJ, is now under investigation by the Indian defense minister but is not the first such 'bribery scandal' for Finmeccanica - whose CEO generously offered to step down if the Italian government (which owns 30.2% of the firm) asks him to. The share price plunged over 8% and was halted as analysts suggested - rather remarkably - that this might make it harder for Finmeccanica to compete for contracts in an already difficult market in which governments are cutting back on military spending. The sad truth appears to be that, whether pandemic or recently driven by a tougher economic environment, fraud runs deep - and its just a matter of time before it comes out, especially with the election so close.

Italian police early on Tuesday arrested Finmeccanica SpA Chief Executive Giuseppe Orsi as part of an investigation into possible international corruption related to the 2010 sale of helicopters by the Italian aerospace company to India, according to the prosecutor in the investigation.

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Mr. Orsi has been under investigation for several months in the case, in which Italian prosecutors are looking into whether the helicopter unit of Finmeccanica paid bribes to secure the €560 million ($750 million) sale of 12 helicopters to the Indian government, according to Finmeccanica and a person close to the investigation. Mr. Orsi was chief executive of AgustaWestland, the helicopter unit, at the time.

Eugenio Fusco, the prosecutor on the case, also said that Bruno Spagnolini, current head of AgustaWestland, had been placed under house arrest as part of the same probe. Mr. Spagnolini was chief operating officer of AgustaWestland in 2010.

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The arrest of Mr. Orsi—who runs a company that is majority-owned by the Italian state—comes at a politically sensitive moment, just two weeks ahead of national elections. Outgoing Prime Minister Mario Monti said the government would deal with management issues created by the arrest.

"(This opens up) a problem of governance at Finmeccanica, which we will address," he said in a radio interview on Tuesday morning.

Mr. Orsi has said that he would step down from his position if the Italian government, which owns 30.2% of Finmeccanica, asked him to.

Finmeccanica's stock fell 8.06% to €4.37—its lowest in two months—after being suspended from trade on the opening of the Milan exchange.

Mr. Orsi's arrest is the latest in a string of legal troubles for Finmeccanica. Prosecutors in other Italian cities are investigating the company on suspicion that it engaged in corrupt activities to win various types of contracts in Latin America, Asia and at home. Finmeccanica has denied the allegations.

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Massimo Vecchio, an aerospace analyst at Italian bank Mediobanca, MB.MI 0.00% said in a report that Mr. Orsi's arrest risked damaging Finmeccanica's international reputation, possibly making it harder for the company to compete for contracts in an already difficult market in which governments are cutting back on military spending. Finmeccanica said it had no comment on Mr. Vecchio's analysis.